Silver price fell on Friday on concerns that the US economy could be headed for a recession. XAGUSD was down by 0.6 percent as of this writing, trading at $28.35 per ounce. Silver’s richer cousin, gold, headed to the upside, with its higher safe haven status making it a magnet amidst a risk-off sentiment. Silver dabbles as both a luxury metal and an industrial metal, with the latter function predisposing it to decline in times of economic contraction.
The US economy reported a weaker-than-expected Non-Farm Payrolls numbers on Friday, with the July figure standing at 114k, down from June’s downward-revised 179k, and far-below the forecast 176k. In addition, the unemployment rate rose to 4.3 percent, above the forecast 4.1 percent. In addition, the US economy’s red flags were compounded by weak Factory Orders, which declined month-over-month by -3.3 percent versus the forecast contraction of -2.7 percent.
These figures paint a gloomy picture for silver price, as they denote a potential contraction of US economy, which would result in reduced demand for the grey metal. Already, silver had been grappling with declining factory activity in China, in recent weeks. That said, however, the weak economic data will also pressure the US dollar, which could provide support for the dollar-denominated metal.
On the 4-hour chart, silver price has recently crossed below the middle Bollinger Band and is attempting to go below the lower band, near the 28.11 level. This signals strong seller control, which is supported by the upward crossover of the MACD signal line above the indicator line. Therefore, holding the current market fundamentals constant, we are likely to witness further declines in the near term.
The momentum on the XAGUSD pair signals control by the bears below the 28.53 mark. In that case, the first support will likely be at 27.25, but the sellers could breach that mark on extended control, potentially going on to test 28.00. Alternatively, the bulls will likely take control if silver price goes above 28.53. The resulting momentum will likely encounter resistance at 28.77, above which the downside momentum will be invalid. Also, extended control by the buyers could strengthen the upside momentum to test 29.00.
This post was last modified on Aug 02, 2024, 18:50 BST 18:50